Christie Identifies State Worker Pensions as a Top Priority in First State of the State Address

Governor draws sharp rebuke from Senate president for his plan to fix the public employee benefit system.

If New Jersey is ever going to dig out of its self-made fiscal hole, virtually everyone agrees it is going to have to overhaul its lucrative pension benefit system for public employees.

A recent study, Gov. Chris Christie noted during his first State of the State address, found that the pension funds of 11 states will be out of money by 2020, with New Jersey among those earning the dubious distinction.

But deciding just how much public employees will have to give back before the state begins to bridge the $54 billion gap in its pension system looks to be the next big dust-up between the Republican governor and the Democratic-controlled legislature.

Headed for Bankruptcy

In his remarks to lawmakers in the Assembly chambers yesterday, Christie said fixing the state’s pension and health benefit systems in order to save them is one of his top three priorities of the new year. "Benefits are too rich, and contributions are too small, and the system is on a path to bankruptcy," the governor said during his speech.

Christie’s proposals for reforming the system includes raising the retirement age of public employees, curbing cost-of-living adjustments in times of low inflation and requiring contributions from employees toward their own retirement system.

Then came the kicker. "Finally, if we can make real reform a reality, the state must also begin to make its pension contributions," Christie told lawmakers.

That triggered an angry reaction yesterday following the speech from Senate President Stephen Sweeney (D-Gloucester), who proposed his own plan for overhauling the pension system last week. He called for an end to automatic pension raises for employees and proposed to make workers pay more to preserve a 9 percent benefits increase enacted a decade ago.

At the same time, Sweeney yesterday predicted an overhaul of the New Jersey pension system won't fly without a guarantee from the governor that the state will begin paying its share.

"As far as pension reform, we’ve done it," Sweeney said after the governor’s address, referring to the legislative changes enacted last year, which required all beneficiaries to begin contributing 1.5 percent of their salaries toward their health care. "He signed the bill saying he would make the payment. You’re only as good as your word," said the legislature's top Democrat.

Missed Payments

Christie did not make a $3.1 billion payment this year, the latest in a series of missed or greatly reduced payments by governors of both parties over most of the past 20 years, which has helped contribute to the huge deficit in the pension plan. Sweeney yesterday repeatedly said the governor had pledged to begin making payments to the plan when he signed legislation last spring forcing public employees to contribute to their benefit plans.

The bill Christie signed last spring committed the state to ramp up to full funding of public employee pensions within seven years, beginning with a payment equivalent to one-seventh of that amount in the upcoming budget, which is currently projected to be about $500 million.

The governor has proposed changes that include rolling back a 9 percent pension increase the legislature granted a decade ago when the economy was vibrant. He's also proposed raising the retirement age to 65, from 62, and making all workers contribute 8.5 percent of their salaries to their pensions, a greater percentage than most do now.

Barbara Keshisian, president of the New Jersey Education Association (NJEA), said the teachers union welcomed the debate over pension reform, but questioned the Governor’s record. "His vision for pension reform is fatally flawed because he still refuses to admit his role in the state’s failure to contribute one penny to the pension funds in 13 of the last 17 years," she said.
"Slashing benefits and raising costs for employees will not solve the problem the state has created for itself. He must step up and lead by making regular, responsible state contributions," Keshisian said.